Lloyd’s threat: Anxiety as AON struggles to save Nigerian airlines

There is unease among domestic airlines in Nigeria following a threat by Lloyd’s of London, the world’s leading insurance market, to blacklist them over irregular payment of premiums.

This is another unfortunate consequence of a biting economic recession Nigeria is currently undergoing which has among other things thrown the nation into acute shortage of foreign exchange.

Chairman of Airline Operators of Nigeria, AON, Capt. Nogie Meggison, who disclosed this last week said the representatives of Lloyd’s of London market who were in Nigeria recently noted that the Nigerian market is a high risk market yet the volume of business from the country is “quite modestly small” and airline brokers are not paying their premium.

Meggison also recalled that they (Lloyd’s representatives) cautioned that in view of the fact that airline brokers in Nigeria have in recent times failed to pay their premiums the Lloyd’s market might have no other choice than to blacklist the country which might have far-reaching consequences for the aviation industry and the country to a large extent.

According to him, Nigeria airlines operators say they have Naira; but that they can’t pay the premiums due to forex constraints. He revealed further that “Lloyd’s market accounts for about 92% of reinsurance of airlines globally, 5% by Russian market, Cyprus and others, while a mere 2% is retained locally worldwide”

“The Nigerian market is grossly unable to effectively underwrite risks in aviation because of the high exposure of an average $500million for just one airplane to cover hull, war and third party liability.

“When this figure is multiplied by the number of aircraft operating in the country it becomes clear that Nigerian insurance companies can’t cope considering the enormous volume of resources needed to cover all those aircraft of which the total coverage value will be in excess of $6bn”.

“Virtually 100% of the aircraft being operated in Nigeria are re-insured in the Lloyd’s market. Hence, Nigeria can’t afford to be blacklisted as a nation because this will have very grave and deleterious consequences, as the entire domestic airlines will shut down since airplanes can’t be operated without being insured . It will take some days at best to switch to the secondary market of Russia and China, whose premiums will also have sky-rocketed if we are blacklisted by Lloyd’s.”

“A blacklist will certainly have a negative impact on the Nigerian economy arising from inability to acquire aircraft from Lessors with no insurance, total suspension of operations by airline charter and oil support helicopters, job losses, and other sectors being reinsured by Lloyds market such as oil rigs, vessels, high rise buildings, airports and terminal buildings etc. Similarly, a downgrade or outright blacklist will mean very high premiums due to high risk levels.”

The AON chairman also cautioned that if Nigeria is blacklisted from Lloyd’s market operators might still have a difficult time getting their aircraft insured because the alternative is the Chinese or Russian markets “which might find it hard to absorb them due to the fact that Lloyds has blacklisted us.”

He said, for instance, “if Nigeria is blacklisted the premiums will rise by 300% due to the high risk, adding that even the national carrier of Russia, Aeroflot Airlines has 98% of its risks underwritten by Lloyds of London market while 2% is retained locally in Russia; so is Air China.

“We are not keeping to payment dates. Domestic carriers have a 4-months backlog on payment. It will be funny to wait until there is an incident before the airline tries to pay its premium,” Meggison warned.

“We therefore use this medium to call on the Minister of State Aviation, Senator Hadi Sirika to as a matter of urgency come to the aid of domestic airlines operating in the country by forging a joint working group with the Federal Ministry of Finance and the Central Bank of Nigeria to brainstorm and cross-fertilize ideas on how the nation can take exigent steps to forestall a potential backlash on the Nigerian economy and totally avoid the blacklist in the interest of safety and economic prosperity of the country.”

Business Hallmark recalled that Arik Air, the largest domestic carrier, had on September 13 temporarily shut down operations when its insurers withdrew services over inability to meet some financial obligations.

This is why the domestic carriers are afraid that such fate might befall them unless government urgently comes to their rescue by conceding some dollars to them to regularise their insurance premiums.

An airline operator said, “What is happening is not different from the foreign exchange constraint we have been experiencing all this while. We also pay our premium in dollars which we are not being able to meet considering the non-availability of forex.

“So now that Lloyds is threatening to downgrade and blacklist us, it means more woes for the operators. The whole domestic network may just collapse and we all know the implication of that.”

Recent posts

Second Republic lawmaker, Dr Junaid Mohammed has noted that President Muhammadu Buhari has performed poorly in office and it would be irrational for Nigerians to vote for him in 2019. Dr Mohammed who made the assertion in an interview with Vanguard on Saturday, also criticized Buhari for being a poor reader who according to him, […]

Former President Olusegun Obasanjo continued his visit to Bayelsa State after inaugurating some projects of the state government on Friday. The former president continued his tour of the state on Saturday with the laying of the foundation for the establishment of Azikel Refinery. The refinery is owned by Dr Eruani Godbless, a prominent businessman and […]

Quite notice, hate speeches and President Buhari’s Northenisation/Islamisation agenda by Professor Ben Nwabueze NATURE OF HATE SPEECHES In the aftermath of the divisions in the country caused by President Buhari’s Northernisation/Islamisation Agenda, as manifested in his lopsided strategic appointments that unfairly favour the North as against the South, and the complete exclusion of the South-East […]

OBINNA EZUGWU Veteran columnist and elder statesman, Chief Adetola Adeniyi has warned former Lagos governor, Senator Bola Ahmed Tinubu against supporting President Muhammadu Buhari’s second term bid, as according to him, such could mark the beginning of the end of his influence in Yoruba land. Chief Adeniyi who led the Global Intelligentsia for Buhari, a […]

President Muhammadu Buhari has strongly condemned Thursday’s massacre of innocent persons in Birane village, Zurmi Local Government Area of Zamfara State. The President stated this in a statement issued on Friday by his Senior Special Assistant on Media and Publicity, Mr Garba Shehu, following the death of at least 18 persons as a result of […]

Former President Olusegun Obasanjo on Friday visited former President Goodluck Jonathan at his home in Bayelsa State. Dr Jonathan welcomed the elder statesman who was in his home for a private dinner, in company with his wife, Patience. Earlier before the visit, former President Obasanjo inaugurated a government specialist hospital in the state and unveiled […]

The Nigerian National Petroleum Corporation (NNPC) said it supplied a total of 29.058 million litres of Premium Motor Spirit (PMS) popularly known as petrol to thirteen Northern states in three days. In its report on daily dispatch to filling stations made available to the News Agency of Nigeria (NAN) in Abuja on Friday, it named […]

An area in which different levels of governments in Nigeria have remained loudly silent and painfully indifferent is childhood disability. Children with disabilities and their parents have over the years ridden on waves of disillusion, despair, and decay. They constitute a tribe of the silent minority that the society has conveniently allowed to disappear into […]

The Infrastructure Concession Regulatory Commission (ICRC) has said that Nigerian ports were now witnessing more efficiency following the reforms of the Fedearl Government. Mr Chidi Izuwah, Acting Director-General of the commission said this during an inspection tour of facilities of the Nigeria Port Authority (NPA) in Rivers state. The acting DG said that the policy […]

World Bank has approved a 486 million dollars credit facility to Nigeria for electricity grid improvements, the lender said on Friday. “The investments under the Nigeria Electricity Transmission Project will increase the power transfer capacity of the transmission network and enable distribution companies to supply consumers with additional power,” the World Bank said. Nigeria’s power […]

The Nigerian Army has announced a cash reward of N3million for information on Boko Haram leader Abubakar Shekau. “The Nigerian Army will give out Three Million Naira (N3,000,000.00) cash reward for any credible information that leads to the arrest of Abubakar Shekau, the fugitive factional Boko Haram terrorists’ group leader,” a statement by the Director, […]

Hailemariam Desalegn, A day after President Jacob Zuma resigned as South African President, Ethio­pian Prime Minister, Hailemariam Desalegn, Thursday announced his resignation in a televised broadcast amid political turmoil in Africa’s fastest-growing economy. The announcement came just after the government released hundreds of political prisoners, including some of the most prominent opposition members in the country, […]

South Africa prepared to welcome wealthy former businessman Cyril Ramaphosa as its new president Thursday after scandal-tainted Jacob Zuma resigned under intense pressure from his own party. Zuma announced he had stepped down in a late-night television address in which he took some digs at the African National Congress (ANC) party that had threatened to […]

Jacob Zuma has finally bowed to pressure and stepped down from office as South African President The embattled president made the announcement in a broadcast to the nation on Wednesday evening, noting that he has stepped down “with immediate effect.” Zuma has been under pressure to step aside following allegations of corruption. On Tuesday, he […]

The Department of Petroleum Resources (DPR), said it fined one oil marketing company, A.Y. Maikifi, based in Kano, the sum of N1.2 billion for diverting 115 truckloads of the products Mr. Mohammed Saidu, Head, Public Affairs Unit, DPR Abuja Zone, disclosed this in Abuja, on Wednesday while addressing newsmen. He said that about 162 truckloads […]